Altrad Services Limited (1) Robert Wiseman and Sons LTD (2) v The Commissioners for HM Revenue and Customs [2022] UKUT 00185 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Upper Tribunal Judge Jonathan Richards,Mrs Justice Falk |
| Neutral Citation | [2022] UKUT 00185 (TCC) |
| Subject Matter | 12 July 2022 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 22 July 2022 |
UT Neutral citation number: [2022] UKUT 00185 (TCC)
UT (Tax & Chancery) Case Number: UT/2021/000006
Upper Tribunal
(Tax and Chancery Chamber)
Hearing dates: 9-10 June 2022
Rolls Building, London
Judgment given on 12 July 2022
Before
MRS JUSTICE FALK
UPPER TRIBUNAL JUDGE JONATHAN RICHARDS
Between
ALTRAD SERVICES LIMITED (1)
ROBERT WISEMAN AND SONS LTD (2)
Appellants and
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE & CUSTOMS
Respondents
Representation:
For the Appellants: Jonathan Peacock QC and Edward Hellier, Counsel, instructed by KPMG
For the Respondents: David Milne QC and Barbara Belgrano, Counsel, instructed by the General
Counsel and Solicitor for Her Majesty’s Revenue and Customs
2
DECISION
Introduction
1. These are appeals against a decision of the First-tier Tribunal (Tax Cha mber) (the “FTT”) released
on 23 March 2020 (th e “Decision”). The first appellant was previou sly na med “ Cape Industrial
Services Limited” and referred to in the Decision as “CIS”, an abbreviation that we will also use. We
refer to the second appellant as “Wiseman”.
2. By the Decision, the FTT dismissed the ap pellants’ appeals against closure notices that HMRC
had issued reducing their entitlement to capital allowances. The closure notice for CIS related to its
accounting period ended 31 December 2010 and, by denying capital allowances, made CIS liable to
additional corporation tax of £2,977,863. The closure notice for Wiseman related to its accounting
period ended 31 March 2011 and resulted in an additional corporation tax liability of £12,623,202.82.
3. The appellants appeal with the permission of the Upper Tribunal and, by their Responses to the
appeals, HMRC seek to rely on arguments which were unsuccessful before the FTT.
Overview of the capital allowances regime so far as relevant to these proceedings
4. These appeals relate to the detailed operation of the capital allowances regime set out in the
Capital Allowances Act 2001 (“ CAA 2001 ”). Relevant statutory provision s are set out in the
Appendix to this decision, but to put the issues in context we start with a high-level overview of the
regime so far as relevant to these appeals.
5. The depreciation in value of plant and machinery and other capital items does not give rise to a
deductible expense for tax purposes. CAA 2001 seeks to reduce the impact of this rule by providing
for capital allowances to be given, by way of a deduction against taxable profits, in respect of
expenditure on, among other things, plant and machinery used f or the purposes of a “qualifying
activity”, which includes a trade. Allowances are generally given on a “poo led” basis , so a taxpayer
incurring expenditure to acquire plant and machinery increases the pool of expenditure qualifying for
allowances. Allowances are made as a percentage of the balance available in the pool, the pool being
reduced by the amount of the allowances given (known as the reducing balance basis). A taxpayer
selling plant and machinery that has qualified for allowances in any accounting period is required to
bring the sale proceed s into account as a “disposal value”. Amounts brought into account as disposal
value reduce the expenditure in the pool eligible for allowances in subsequent accounting periods or,
if the disposal value exceeds the balance in the pool, create a balancing charge.
6. The general rule, set out in s11 of CAA 2001, is that expenditure on plant and machinery qualifies
for capital allowance s if: (i) the exp enditure is “capital ex pend iture on the prov ision o f p lant and
machinery”, (ii) it is incurred for the purpo ses of a qualifying activity, and (iii) the person incurring
the expenditure owns the plant and machinery as a result of incurring it. Section 61 deals with
“disposal events” , with the paradigm example of such an event occurring when a perso n “ceases to
own” plan t and machinery (s61(1)(a)). As Mr Peacock QC put it in his oral submissions, s11 and s61
are “book-ends” with s11 providing for capital allowances to begin to accrue when plant and
machinery is purchased and s61 providing for future allowances to cease to accrue when that plant
and machinery is disposed of (to the extent that disposal value is brought into account), as well as
recapturing excessive allowances that have been given.
7. Until 200 6, “ownersh ip” of plant and machinery was central to the entitlement to capital
allowances. A taxpayer who incurred expenditure on plant and machinery would not (generally) be
entitled to allowances unless the taxpayer owned the plant and machinery in question (see s11 of
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